Web content delivery and security company Akamai (NASDAQ: AKAM) reported Q2 CY2025 results topping the market’s revenue expectations, with sales up 6.5% year on year to $1.04 billion. Guidance for next quarter’s revenue was better than expected at $1.04 billion at the midpoint, 0.6% above analysts’ estimates. Its non-GAAP profit of $1.73 per share was 13.2% above analysts’ consensus estimates.
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Akamai (AKAM) Q2 CY2025 Highlights:
- Revenue: $1.04 billion vs analyst estimates of $1.02 billion (6.5% year-on-year growth, 2.2% beat)
- Adjusted EPS: $1.73 vs analyst estimates of $1.53 (13.2% beat)
- Adjusted EBITDA: $444.4 million vs analyst estimates of $422.5 million (42.6% margin, 5.2% beat)
- The company lifted its revenue guidance for the full year to $4.17 billion at the midpoint from $4.13 billion, a 1.1% increase
- Management raised its full-year Adjusted EPS guidance to $6.70 at the midpoint, a 7.2% increase
- Operating Margin: 14.5%, in line with the same quarter last year
- Free Cash Flow Margin: 22.6%, up from 5.4% in the previous quarter
- Market Capitalization: $10.89 billion
"Akamai reported excellent results in the second quarter, highlighted by outperformance in both revenue and profitability. Building on our solid momentum from the first two quarters, we are increasing our guidance for revenue and earnings for the remainder of the year, while continuing to invest in key growth areas of security and cloud computing. These investments are paying off — our Cloud Infrastructure Services grew 30% year-over-year — and we expect that rate to accelerate through the remainder of the year," said Dr. Tom Leighton, Akamai's Chief Executive Officer.
Company Overview
Founded in 1999 by two engineers from MIT, Akamai (NASDAQ: AKAM) provides software for organizations to efficiently deliver web content to their customers.
Revenue Growth
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Unfortunately, Akamai’s 4.6% annualized revenue growth over the last three years was weak. This fell short of our benchmark for the software sector and is a tough starting point for our analysis.
This quarter, Akamai reported year-on-year revenue growth of 6.5%, and its $1.04 billion of revenue exceeded Wall Street’s estimates by 2.2%. Company management is currently guiding for a 3.8% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 3.5% over the next 12 months, similar to its three-year rate. This projection is underwhelming and implies its products and services will see some demand headwinds.
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Customer Acquisition Efficiency
The customer acquisition cost (CAC) payback period represents the months required to recover the cost of acquiring a new customer. Essentially, it’s the break-even point for sales and marketing investments. A shorter CAC payback period is ideal, as it implies better returns on investment and business scalability.
Akamai’s recent customer acquisition efforts haven’t yielded returns as its CAC payback period was negative this quarter, meaning its incremental sales and marketing investments outpaced its revenue. The company’s inefficiency indicates it operates in a highly competitive environment where there is little differentiation between Akamai’s products and its peers.
Key Takeaways from Akamai’s Q2 Results
We were impressed by Akamai’s optimistic EPS guidance for next quarter, which blew past analysts’ expectations. We were also glad its full-year EPS guidance trumped Wall Street’s estimates. Zooming out, we think this was a good print with some key areas of upside. The stock traded up 4.1% to $78 immediately following the results.
Indeed, Akamai had a rock-solid quarterly earnings result, but is this stock a good investment here? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.
